Despite a $400 million drop in written premiums, title insurers boosted net income more than 5 percent in 2006, in part by shifting business from affiliated business arrangements to direct operations, according to a new report by consulting and financial analysis firm Demotech Inc.

At 4.94 percent, the industry’s loss ratio was slightly better than 2005, but remains near a 10-year high, Demotech said.

“All signs seem to point to a continued dampening of title industry results, but not a major collapse, suggesting a more sophisticated market better able to weather market fluctuations,” Demotech said in announcing the report’s release.

At $16.4 billion, written premiums were down $400 million in 2006. But premiums written from direct operations made up 14.4 percent of operating income — more than double the share in 2004, and the largest share in 10 years.

Writing a greater share of premiums internally reduced agent commission expenses while increasing other revenue streams, Demotech said. The shift in premium channel from affiliated businesses (ABAs) to direct operations contributed roughly $200 million towards net operating gains, Demotech said, although it remains to be seen how sustainable such gains are.

Compared to 2005, operating income for the industry as a whole was down 1.1 percent, to $17.6 billion, while net investment income was up more than 20 percent. A third of title underwriters managed a better net operating gain to total operating income ratio than they did in 2005, but 42 underwriters reported a net operating loss, compared with 27 in 2005.

Companies managing significant gains through market placement, diversification, or consolidation included:

  • Title Resources Guaranty, which boosted total operating income by more than 30 percent, to $110.3 million.

  • Guarantee Title & Trust, which expanded into six new jurisdictions to write $13.3 million in net premiums.

  • United General Title Insurance Co., which increased net premiums written by 67 percent to $332.8 million after being acquired by First American in February 2005.

At the state level, Florida is poised to surpass California as the state with the most premiums written by the end of 2007, the report predicts. Premiums written dropped almost $600 million in California in 2006 because of the slowdown in the state’s housing market.

The four largest underwriters in California — First American Title, Chicago Title, Fidelity National Title, and Stewart Title Guaranty — reported a combined reduction in policyholders’ surplus of almost $80 million in 2006, compared with an increase of $170 million in 2005. Policyholders’ surplus is a general measure of a company’s net worth.

Across all markets, 39 companies posted combined ratios of over 100 percent in 2006, compared with 24 in 2005. The combined ratio — the sum of the loss ratio and operating expense ratio — is a benchmark for determining underwriting profitability.

Top title insurers of 2006

Source: Demotech Inc.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription